Case Studies

Chesapeake Sprinkler Company

Finding continued success as an employee-owned fire-protection company

Located in Odenton, Maryland, Chesapeake Sprinkler Company (CSC) is a full-service fire protection company offering a complete range of design, fabrication and installation services. Founded in 1978 by James R. Anderson Sr., CSC has completed more than $300 million in contracts for clients over the last 38 years.

With offices in Odenton and Ashburn, Virginia, CSC serves commercial, institutional and municipal customers in the Baltimore and Washington, D.C. metro areas. Unlike many in the industry, the company does all its own fabrication and boasts an 8,000-square-foot fabrication facility as well as a focus on developing in-house automated systems that allow CSC to truly set itself apart.

Chesapeake Sprinkler Company

CSC’s commitment to innovative automated systems isn’t the only thing differentiating the company in a crowded market; since 2001, the fire protection company has been 100 percent employee-owned through an employee stock option plan first launched in 1998.

“Employee ownership gives people the desire to stay in one place,” says Jim Anderson, president of CSC.

While employee ownership has its advantages, it can at times be a difficult corporate structure to navigate. CSC’s revenues are held in a retirement trust, meaning that stockholders do not have to pay federal or state income taxes until they decide to withdraw the funds. This requires a high level of planning and prognostication from management and trustees. The end result is a substantial benefit to all the owner-employees. CSC, which must carefully schedule such distributions to ensure liquidity.

“It has a lot of benefits, but some companies get into a position where redemptions are required and they haven’t planned for those and as a result they get stuck and have to sell the business,” says Anderson.

CSC recently completed an expansion to its Ashburn facility that more than doubled the useable space, increasing the company’s overall storage capacity while improving its overall distribution abilities. “Before we were subcontracting out small storage spaces to carry excess material, but now we’ve basically got rid of all those and centralized that in our new facility, which centralizes distribution and gives us better control,” Anderson says.

Finding a niche in historic renovation

Over nearly 40 years in the business, CSC has developed an expertise in a wide range of industry sectors, but Anderson says the challenge of projects involving the renovation of historic buildings holds particular interest.

“They usually some up as small sections of larger renovation projects and might only represent 3 percent of the entire project, but it’s a unique 3 percent,” he says.

Such projects can present a real challenge for companies such as CSC, who often have to do their own research to compliment incomplete or inaccurate data.

“When you get into historic structures you often have a hard time finding information on the structures, so you go from the bid documents to reality and find things when doing surveys that weren’t included in the bid documents so you just have to be prepared for added costs,” Anderson says.

CSC has experienced its fair share of renovation-related challenges over the years while working on some of Baltimore and Washington, D.C’s most historic sites, including a project at the Department of Agriculture’s headquarters in the early 1990s. “That was built in the 1920s and had some unique features to it, like supporting walls that were solid brick, 3-feet thick,” Anderson says.

More recent renovation projects undertaken by CSC include work to American University’s School of Law as well as an effort that saw a former Sam’s Club location turned into a new facility for sportswear giant Under Armour in downtown Baltimore. “They gutted the building, split it in two and created a two-story office area,” he says.

Labor shortages threaten growth

Looking to the future, Anderson sees a lack of qualified labor as the biggest impediment to CSC’s growth. “It’s not going to be too hard to find people with a computer-aided design background for the design side of the business, but the bigger issue is going to be finding field personnel in a shrinking labor pool because people just don’t want to do that type of work anymore,” he says.

CSC trains all its employees and participates in an apprenticeship program with the American Fire Sprinkler Association (AFSA), but Anderson says that strategy only goes so far.

“AFSA is very selective and the apprenticeship is a four-year process. It’s  also hard to get employees that come out of trade school with fire protection experience because there aren’t fire protection degrees offered —it’s too small of a niche industry — and 20 percent of our work is now done with  subcontractors because we couldn’t find enough workers in the field,” he says.

To combat this issue CSC has increased wages and worked to advocate for the adoption of tools, products and techniques that take less of a physical toll on employees. While these products and strategies already exist in the market, it’s a question of getting those who control the purse strings on a project to understand their benefit.

“Some of the engineers and architects and building owner who use do these specifications are thinking in a very outdated way and in doing so they don’t allow us to use the technology changes to improve not only the ease of installation, but also the cost of installation,” says Anderson, who cites a recent project where owners opted to specify a much heavier pipe than necessary, which presented additional challenges for the crew working to install it.

“A lot of it has to do with the recession because many of the more experienced designers and engineers left the industry and we’re getting a group bunch of younger ones in now who think that if a schedule 10 pipe is OK than a schedule 40 must be twice as good,” he says.

Eying future diversification

Growth in the warehousing market holds great promise for CSC, which is gearing up to meet increased demand. As retailers move to smaller showrooms, the use of warehouses has been increasing across the country. With this comes the need for updated automation systems, and sprinklers are no exception.

“Manufacturers tell us they see this part of the business continuing to expand for the next four or five years,” says Anderson. This trend extends to some of the country’s largest retailers such as Walmart, which is trying to compete with online retailers like Amazon, albeit using a slightly tweaked distribution strategy.

“Amazon builds these gigantic distribution centers of 2 million square feet, but Walmart wants to build distribution centers that are more like 350,000 square feet because they feel it can allow them to cover larger geographic areas more places,” he says.

A relatively material-heavy type of work, warehouse projects can be completed with fewer workers, meaning larger profit margins for CSC. In order to land these contracts, CSC relies on its experienced sales team. “They help keep our name in front of developers because a lot of these things don’t end up on bid lists. We actually have a fairly large sales force relative to most of our competitors,” he says.

As an employee-owned company, success is defined a little differently at CSC than at many other companies, according to Anderson. “Success doesn’t just mean continued growth and opportunity, but longevity and long-term opportunity, because essentially this is a retirement trust. Those who understand that tend to stay and as a result we have some of the lowest turnover in the industry,” he says.

With a newly expanded Ashburn facility, strong reputation in historic renovation and a finger on the pulse of the rapidly growing warehouse market, employee-owned Chesapeake Sprinkler Company will continue to build on a stellar reputation as of the Baltimore and Washington, D.C. area’s leading full-service fire protection companies.

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Spring 2018



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